Employees who are not vested (less than five years service) and those hired after July 1, 2010 will see three changes that will reduce benefits -
- The multiplier used to compute benefits will be reduced to 1.65% from 1.70%,
- The cost-of-living-adjustment will be capped at 3% rather than 5%,
- Average Final Compensation will be based on the average of the highest five years instead of the current three years.
Beginning January 1, 2014 new hires will have a pension system that is part defined benefit (with 1% multiplier) and part defined contribution. The employee will pay 4% of salary into the defined benefit portion and 1% into the defined contribution portion. The employer will match up to 3.5%.
It appears there are no changes for those who are currently retired nor for those with 20+ years of service.
According to the Virginia Education Association, teachers as well as state and local employees will pay more and get less in benefits -
The Joint Legislative and Audit Commission’s actuarial analysis indicates that a 60-year-old teacher making the average teacher salary will receive $9,129 less in annual benefit if they make the minimum required contribution and $874 less if they make the maximum contribution. In short, future teachers will pay more to get less.Senator Creigh Deeds explained in a recent email newsletter why he voted against the VRS bills -
I am concerned that we are imposing on local governments a mandate with an unknown cost. I asked pointed questions during the briefing about the effect of the plans on retirement benefits and about the cost to local governments and did not receive answers that quieted my concern. I am also concerned that we are providing a disincentive for people to work in public service. It is important that we not only maintain trust with those people who are already vested in VRS (and these bills do not affect those people who are vested), but that we provide an incentive for highly qualified and talented people to come to work in public service. The bottom line is that there were too many unanswered questions for me on all of these bills.Senator Deeds went on to state that the best way to restore VRS is to "simply pay into the system what the trustees propose" and what actuaries say is prudent.
Over many years the General Assembly and governors have intentionally underfunded VRS and used the money for other pet projects. The result is a retirement system having $24 billion in unfunded liability and falling below the sound benchmark of 80% funded. Now our "citizen legislators" want to balance the books on the backs of many state employees, local employees, teachers, law enforcement offices, and judges. And because of the rush job on these bills they can't even tell us the effects on the fund's viability or on hiring and retaining a qualified workforce to carry out core services of the Commonwealth.
Even retirees and those with 20+ years of service, who apparently are held harmless by these bills, should remain vigilant. With so many unknowns and inadequate funding their benefits could be in jeopardy when the 2013 legislature convenes.